Belfast Telegraph

Lower corporation tax is 'key to a quick recovery' for Northern Ireland

By Clare Weir

The economy in Northern Ireland will not recover quickly unless there is a "significant" change in the corporation tax rate, according to an influential new all-Ireland report.

The latest Ernst -amp; Young Economic Eye document also said that as things stand currently, job levels in Northern Ireland will not recover to pre-recession peaks for almost a decade.

The survey says Northern Ireland has now emerged from recession in output terms and predicts 1.2% growth in Northern Ireland in 2011, but concedes that employment and housing levels will take longer to bounce back.

Ernst and Young has predicted that between 2012 and 2020 manufacturing in Northern Ireland could decline by 8,000 jobs, as Northern Ireland does not have the same attractive corporation tax rate currently enjoyed by the Republic, at 28% compared to 12.5%.

Neil Gibson, senior advisor to the Economic Eye, said: "For Northern Ireland the forecast decline in the unemployment rate is predicted to be very slow, only taking the unemployment rate back to 6.7% - the rate in 2000 - from a peak of just over 8%."

Overall, the Northern Ireland economy, described as "more insulated", was said to have a much smaller export base and while short-term growth forecasts are stronger than the Republic's, in the medium to long-term it is projected to return to a rate of growth below that of its neighbour.

However Mr Gibson added: "This is unless there is a significant change in Northern Ireland's corporation tax rate and a more pro-active approach to rebalance the economy which sees actual policy change, as distinct to strategy documents and statements of intent with no actual material change in policy."

Turning to housing, the report says that demand won't reach 1980s levels until 2015.

Northern Ireland house prices are forecast to fall by one-third, compared to 5-10% in the rest of the UK.

Mr Gibson said that while Northern Ireland house prices have so far corrected significantly, they still remain high relative to Northern Ireland incomes and the forecast modest falls in average house prices here.